Ecton Case Analysis

Ecton is a small company engaged in developing technologically innovative products for the growing ultrasound market. From the case we can make out the increasing potential and scope in the ultrasound market and Ecton definitely has been able to develop a promising and innovative product for the market. Let us look at the possibilities if the company is acquired by a large corporation. 1. Though the company was formed with the ultimate aim to be acquired but being acquired by a large corporation comes with a lot of shackles. If any company is acquired by an organization larger than itself then the large organization tends to impose its culture and working on the smaller organization. In Ecton’s case the present staff and management are a close knit group and have been able to develop their first product on schedule. Also since they have developed just one product, there is no standard development cycle and procedure. If acquired by a large organization, it may try to impose its culture on Ecton and may lead to team losing its priorities and development be mired in organizational issues. 2. It may also happen that though Ecton is acquired by a large corporation due to its product but the management of the company may not share the vision of the Ecton’s team. This may lead to hindrance in further research and development process. 3. Another important consideration is that the product has not been tested commercially till date. Though the product has a significant advantage in the target market but the real test for the product begins when it is commercially launched in the market. Even research companies have not given any major encouragement and in this case it may prove difficult to find the right buyer and then convincing the buyer of the right price for acquisition would prove to be another uphill task.
Therefore being acquired at this stage by a large company can prove to be fatal and a wrong decision. Acquisition would only be fruitful if the product had been tested for its commercial success and acceptability in target market. This is because any company acquiring would only agree to pay a premium if it is convinced of ability to capitalize on the acquisition. So the thought of looking for a suitor should be put on backburner for time being. Some other recommendations for Ecton are as follows: 1. They should focus on quickly finishing the trials and launching the product in the market commercially. Also from the case it is clear that the established investors are ready to invest in third round of funding, so a portion of these funds should be used to develop the marketing and supply chain functions to support the monetization of the product. Since the Ecton’s team is clear on the target market and from the case it is clear that cost is an important consideration for the target segment so the marketing efforts are more likely to bear positive results. Therefore at present Ecton should concentrate on building its capabilities for the commercialization of the product. 2. Also Ecton should concentrate on further development and advancement of technology. This would remove the performance related issues in the product and make it a more attractive proposition for the buyers. 3. Also the Ecton team should concentrate on smoothening their development cycle as this will help in maintain the soul and spirit of original team of Ecton in case of acquisition at a later stage. 4. Looking for a suitor should be postponed till the time Ecton gains significant technological advantage and fine tunes the performance of its products. Also the product should be accepted in the market. Acquisition only makes sense when further growth is saturated and Ecton feels that it cannot further grow without the support of a large partner.